Tuesday, June 17, 2008

Paging Dr Bernanke!

Today's McPaper has an interesting report on what the Fed's Chairman, Ben Bernanke, thinks about the state of health care and the economy. According to Dr Ben, "(S)pending on health care is the single-largest component of overall consumer spending — larger than spending on either housing or food."
IB regulars are familiar with our anthem: Health insurance costs increase primarily because health care costs increase. To hear the Chairman of the Federal Reserve esentially endorse that position is indeed wonderful, but we won't let it get to our heads.
That increase is driven primarily by heavy and growing demand, and the rather counter-intuitive notion that increasing tech doesn't drive down the cost of health care.
[ed: To understand why that's counterintuitive, consider PC's. As they've gotten more powerful, with more features, they've actually gone down in price. Not so with health care]
And that increase shows no sign of slowing down. According to Dr Ben, "(t)o buffer the effects of rising health-care costs on household budgets, the government may have to absorb an increasingly large share of the bill for those costs." Hunh? The government may have to absorb these costs? Um, no: we will absorb them: the gummint has no money. It must confiscate...er, uh, tax us to aquire it.
And gummint spending in the health care sector is a major driver of these increasing costs: "Medicare for retirees and Medicaid for low-income people — takes up 23% of federal spending that is not for interest payments." Ouch!
Food for thought.
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